May 27 (Bloomberg) -- Reliance Industries Ltd., operator of
the world’s largest oil refining complex, headed for its biggest
gain in eight months after discovering a new natural gas deposit
in its biggest block off India’s east coast.

The stock, the top gainer in the S&P BSE Sensex Index today,
rose 3.9 percent to 816.40 rupees in Mumbai, bound for the
sharpest rise since Sept. 14. The shares have declined 2.7
percent this year, compared with a 1.9 percent increase in the
benchmark index.

Reliance, with partners BP Plc and Canada’s Niko Resources
Ltd., announced on May 24 a “significant” discovery of gas and
related liquids in a deposit that lies under the biggest
producing areas in the KG-D6 block in the Bay of Bengal. The new
reserves may help billionaire Mukesh Ambani-controlled Reliance
reverse a three-year decline in production from the block and
boost earnings that have dropped in four of the last six
quarters.

“This discovery opens up a new liquid-rich gas condensate
play offshore India,” Neil Beveridge, a Hong Kong-based analyst
at Sanford C. Bernstein & Co., wrote in a report today, while
upgrading Reliance to ‘outperform’ from ‘market perform’. “With
follow-up exploration potential across India’s east coast, this
makes us more positive that Reliance may yet to be able to build
a material gas business in India and find a productive use for
its growing cash pile.”

Reliance had cash and equivalents of 829.8 billion rupees,
deposited in bank deposits, mutual funds and government
securities as of March 31, the company said in an April 16
statement. That surpassed its 724.3 billion rupees of debt
outstanding.

Reliance's Partners

The company and its partners plan to spend more than $5
billion in the next three to five years to develop gas
discoveries in the KG-D6 block off India’s east coast, Reliance
said April 16. Gas production from KG-D6 declined 39 percent to
336 billion cubic feet in the 12 months ended March 31 from a
year earlier. The drop was spurred by reservoir complexity and a
natural decline in output, it said.

BP, Europe’s second-biggest oil company, bought stakes in
KG-D6 and 20 other blocks for $7.2 billion in August 2010 as
Ambani sought the London-based company’s technology to drill and
produce gas from deepwater areas. Niko owns a 10 percent stake
in the KG-D6 block.